Independent board to oversee Austin Energy

PublishedMarch 27, 2013

Thursday, Feb. 14, 2013

By Marty Toohey
Austin American-Statesman

The Austin City Council voted late Thursday to create an independent board of public-power experts to oversee Austin Energy, putting a buffer between the city’s elected officials and the publicly owned electric utility.

A unanimous council directed City Manager Marc Ott to work out the finer points of the change and bring it back in a month for final approval. Mayor Lee Leffingwell, who championed the change, wants to complete the transition by the end of the year.

Leffingwell said that he and other council members favor the change "for the simple reason that we want to save the utility. I do not believe it is on a sustainable course."

Though Thursday night’s vote was unanimous, Council Members Laura Morrison and Kathie Tovo hinted at "no" votes when the final proposal comes back to the council, saying they worry a board could be insulated from Austin Energy’s customers and less likely to listen to their wishes.

The debate over an independent board was sparked by a controversial rate increase that took effect in October, but Thursday’s vote was as much about who sets such basic policies as whether Austin Energy should cut ties to coal.

An unpopular deal to buy electricity from a plant powered by wood waste served as fodder for both sides of the debate. Prior to the council approving the deal in 2008 after minimal public scrutiny, a litany of critics warned that the plant was a bad deal, and its electricity is now so expensive Austin Energy isn’t using it. Those in favor of establishing a board argued the deal wouldn’t have happened if professionals were scrutinizing the deal instead of politicians.

Council Member Bill Spelman said the council will maintain an appropriate level of control — it can veto any rate increase, any board nominee or any investment of more than $100 million.

"I don’t know how to keep (Austin Energy) cheap," Spelman said. "I’m not a not an expert in power production. I need some help."

That thinking didn’t satisfy the activists who spoke against the change.

Environmental activist Karen Hadden noted that over the past seven years San Antonio, with its independent board, has raised rates 15 percent, while Austin Energy, after 18 years without an increase, recently put in place an increase of 8 percent, on average, with another 3 percent rise anticipated in 2014. Even while keeping rates low, the Austin utility earned a national reputation for innovation and effective use of green energy. She noted that San Antonio’s proposal to invest in an expanded South Texas nuclear plant ended "with them having to write off a $400 million loss" when the deal went awry.

But the council vote pleased a coalition of large businesses and business advocates, who contended Austin Energy is too complicated to leave in the hands of elected officials without public-power experience.

The change was sought by state Sen. Kirk Watson, D-Austin, who has filed legislation to intended to remove any doubt about whether the council can establish an independent board without a public referendum.

The new Austin board — assuming council members don’t change their minds in the next month — will have seven members. One of them will be the mayor. Initially, the council will select the other six from a pool collected by a professional search firm. Board members will be able to serve up to 12 years and the board will nominatereplacements when vacancies occur. The council will have veto power over those appointments, though.

At least one board member must come from among the 50,000 Austin Energy customers who live outside the city limits. That was a nod to suburban customers, who argue they lack an adequate voice because they cannot vote in council elections but cannot switch electric providers.

Council Member Chris Riley, responding to questions about whether the city needs to change the current system — which has the Electric Utility Commission advising the council on Austin Energy matters — noted the advice of Shudde Fath, who has served on the commission so long its meeting room is named for her.

"The Electric Utility Commission sees what is going on with Austin Energy and is unable to manage it," Riley said in echoing Fath. "The City Council doesn’t know what’s going on and believes the commission can manage Austin Energy."

Critics also said the City Council, after spending 17 hearings digging into the details of Austin Energy’s business, ultimately improved the rate increase, for instance by making it more palatable to churches. On Thursday, though, the staff of the state’s Public Utility Commission said the concessions to the churches weren’t appropriate.

Just before the final vote, Leffingwell said of the council’s involvement, "I think in the coming weeks and months we’ll have a good idea just how good a job the council did with the rate increase." He didn’t mean that in a good way.

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